Nvidia Eyes The Low-Cost Tablet Market With Tegra Note

After much speculation Nvidia (NASDAQ:NVDA) finally introduced the Tegra Note, a reference platform for Android based tablets on September 18. Unlike its gaming device Shield, the company will not build and sell the Tegra Note directly. Though the platform will be designed by Nvidia, its partners will have the opportunity to further build on the reference design and sell the final product in the market under their own brand. Nvidia’s partners include EVGA and PNY Technologies in North America; EVGA, Oysters and ZOTAC in Europe; Colorful, Shenzhen Homecare Technology and ZOTAC in Asia-Pacific; and XOLO in India. Tegra Note tablets will be available for sale next month onward.

Tegra Note is a 7-inch platform with Tegra Zone gaming, stylus support, front facing speakers offering the widest frequency range in a tablet, a camera with 100-frame-per-second slow motion recording and up to 10 hours of battery life while playing HD video. Powered by the Tegra 4 processor, the company claims that the device will be the world’s fastest 7-inch tablet.

In 2012, Nvidia launched a similar initiative named Project Kai, a Tegra 3 reference design to build low-cost, high quality tablets. Google’s first generation Nexus 7 was based on the same. By delivering the entire platform and not just the hardware, Nvidia promises that Tegra Note offers much more in the same price range (starting $199).

Having seen its Tegra processor revenue climb by approximately 200% and 30% in 2011 and 2012 respectively, Nvidia anticipates the same to decline by $200 – $300 million this year. Much of the decline can be attributed to the ramp down of Tegra 3 products and the company’s conscious decision to delay the launch of Tegra 4 by one quarter, in order to pull up the production of Tegra 4i chips.

Tegra 4 is the world’s first quad-core processor based on Cortex A15 and while the delay in its launch will impact its short term growth, we believe it will be an important factor in expanding Nvidia’s presence in the mobile computing space. Nvidia has already received Tegra 4 orders for Xiaomi Mi3, Microsoft’s second-generation Surface RT as well as Asustek, Toshiba and HP tablets. ^[1]

Tablet shipments are estimated to grow by 78.9% between 2013 – 2017, increasing from 227 million units to 407 million units by 2017. Research firm IDC expects lower-cost devices to drive global demand. ^[2]

Nvidia lost out on Google’s second generation Nexus 7 tablet and faces competition from the yet to be launched iPad Mini. Nevertheless, since the tablet market is expanding at a rapid pace we believe that Nvidia will manage to expand its footprint in the market. With Tegra 4, in addition to mobile and tablets, the company aims to expand its reach to other large markets where visual computing matters, such as auto navigation systems, TV set top boxes and new desktop foreign factors like all-in-one and smart monitors.

We forecast Nvidia’s Tegra revenues to cross $1 billion over our review period.

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1. Nvidia sees growing Tegra 4 orders, Digitimes, September 9, 2013 [↩]
2. Tablet Shipments to Top Total PC Shipments in the Fourth Quarter of 2013 and Annually by 2015, IDC Press Release, September 11, 2013 [↩]